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U.S. equity markets finished higher after treading water most of the day in sideways-to-lower trading action. Traders seemed to be waiting for a catalyst all day. Near the close equity markets mounted a strong surge to finish on their highs.

Thursday night, news that China’s inflation rate was higher than expected, fueled speculation of a rate hike which helped drive down demand for higher yielding assets. The lack of follow-though to the downside, however triggered a short-covering rally which helped to boost equity prices from their early morning lows. The March E-mini S&P 500 broke through the January top at 1148.00. This action kept this market on pace to reach the March 12th objective of 1156.00.

June Treasury Bonds recovered from earlier losses to close better. Earlier traders sold Treasuries in anticipation of a possible rate hike by China. The inability to break -through yesterday’s low at 115’27 triggered a short-covering rally near the mid-session. Technically, this market picked up strength after regaining a 50% line at 116’04.  This price will dictate the direction of the market over the short-run. Holding above it means the market is discounting the Chinese news. Falling below it will indicate a further drop to 115’06. If the rally continues, then look for a retracement to 116’30 to 117’06.

The weaker Dollar triggered a short-covering rally in April Gold. Technically this market posted a minor closing price reversal bottom. Oversold conditions also contributed to the turnaround. A follow-through rally on Friday could trigger a retracement to $1123.10.

June Crude Oil finished unchanged after trading slightly weaker throughout the day. A decline in demand for higher risk assets was behind today’s early weakness as well as overbought conditions. Technically, this market is beginning to weaken. Trend lines are being penetrated and momentum is slowing. The charts indicate there is room to the downside, but the weaker Dollar and firm Euro helped to limit losses. Another surge in equity markets could trigger a retest of the recent high at 83.77.

The U.S. Dollar declined into the close after trading in a tight range most of the day. A strong surge in the equity markets late in the session confirmed investor demand for risky assets, thereby pressuring the lower yielding Dollar.

At times on Thursday, traders were demanding lower yielding currencies in response to an overnight report that showed China’s consumer-price index spiked higher in February.  Investors speculated that its central bank would have to raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

The Dollar extended its earlier gains after economic reports showed the trade deficit unexpectedly shrank and weekly initial claims for jobless benefits fell. These gains were short-lived however, as investor demand for higher-yielding assets picked up late in the trading session.

The March Japanese Yen finished unchanged after a choppy, two-sided trading session. Earlier in the day, it rallied on speculation that China may have to hike interest rates to curb economic growth but then broke when U.S. equity markets weakened. Finally at the end of the day, the Dollar was able to mount a comeback against the Japanese Yen as the stock market soared into the close.

The March Canadian Dollar rallied hard after early session weakness to finish higher. The early session weakness was triggered when this market failed to attract buyers after reaching its highest level since October 2009. Overbought conditions and less demand for higher risk assets also helped to contribute to the early weakness. The strong rally late in the trading session drove up demand for higher risk assets, thereby underpinning the Canadian Dollar into the close.

The bigger picture still suggests that the stronger currency is the Canadian Dollar. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The March Euro closed higher in light trading. Today’s action put this market in a position to challenge the recent top at 1.3735 while in the process, forming a new main bottom at 1.3528. Technically, this currency is trading in a range. A support base is being built which suggests an impending rally, but this market needs a catalyst to drive it through the recent top. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank voted on Thursday to leave interest rates at historically low levels while reiterating its stance to intervene decisively if necessary to protect the currency. It also raised its outlook for 2010 inflation from 0.50% to 0.70%. The rally in the Euro helped strengthen the March Swiss Franc. Accelerating upside pressure could trigger a further rally into a major 50% level at .9526.

The March British Pound closed higher after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. The fact that this market was able to hold onto most of its overnight gains could be a sign that the recent selling pressure has dried up. This could mean a short-covering rally is imminent. Gains could be limited however because aggressive shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The U.S. Dollar declined into the close after trading in a tight range most of the day. A strong surge in the equity markets late in the session confirmed investor demand for risky assets, thereby pressuring the lower yielding Dollar.

At times on Thursday, traders were demanding lower yielding currencies in response to an overnight report that showed China’s consumer-price index spiked higher in February. Investors speculated that its central bank would have to raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

The Dollar extended its earlier gains after economic reports showed the trade deficit unexpectedly shrank and weekly initial claims for jobless benefits fell. These gains were short-lived however, as investor demand for higher-yielding assets picked up late in the trading session.

The USD JPY finished unchanged after a choppy, two-sided trading session. Earlier in the day, it broke on speculation that China may have to hike interest rates to curb economic growth but then rallied when U.S. equity markets weakened. Finally at the end of the day, the Dollar was able to mount a comeback against the Japanese Yen as the stock market soared into the close.

The USD CAD dropped hard after early session strength and finished lower. The early session rally was triggered when this market failed to attract sellers after reaching its lowest level since October 2009. Oversold conditions and less demand for higher risk assets also helped to contribute to the early strength. The strong rally late in the trading session drove up demand for higher risk assets, thereby pressuring the USD CAD into the close.

The bigger picture still suggests that the stronger currency is the Canadian Dollar. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The Euro closed higher in light trading. Today’s action put this market in a position to challenge the recent top at 1.3735 while in the process, forming a new main bottom at 1.3530. Technically, this currency is trading in a range. A support base is being built which suggests an impending rally, but this market needs a catalyst to drive it through the recent top. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank voted on Thursday to leave interest rates at historically low levels while reiterating its stance to intervene decisively if necessary to protect the currency. It also raised its outlook for 2010 inflation from 0.50% to 0.70%. The rally in the Euro helped weaken the USD CHF. Accelerating downside pressure could trigger a further decline into a major 50% level at 1.0513.

The GBP USD closed higher after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. The fact that this market was able to hold onto most of its overnight gains could be a sign that the recent selling pressure has dried up. This could mean a short-covering rally is imminent. Gains could be limited however because aggressive shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The AUD USD fell overnight on speculation China will have to raise interest rates to curtail its economic growth but was able to recover most of the loss on renewed demand for higher yielding assets into the close. The lower stock market helped contribute to the weakness, but led the rally later in the session. There is not question the Australian economy is strong, but speculators may begin to question whether it can sustain this growth without the support of China.

The NZD USD finished lower after the Reserve Bank of New Zealand voted to leave its benchmark interest rate unchanged. The inability to close higher after the strong late session equity market rally confirms the weakness in the currency.

In a statement after the monetary policy announcement, NZRB Governor Bullard said weak consumer spending and higher bank-funding costs are slowing the recovery. He stated further, “Households are still cautious with house sales and credit growth remaining subdued”. Given the tone of this report, investors are speculating that interest rates will remain low until at least June, but some are even projecting until the end of the year.

U.S. equity markets are trading sideways-to-lower at the mid-session while seemingly waiting for a catalyst to trigger its next move.

Last night’s news that China’s inflation was higher than expected, fueled speculation of a rate hike which helped drive down demand for higher yielding assets. The lack of follow-though to the downside, however triggered a short-covering rally which is helping to boost equity prices from their early morning lows. The March E-mini S&P 500 is still in a position to challenge its January high of 1148.00, but so far aggressive buyers have been scare. The daily swing chart suggests a breakout over this level will ignite a rally to 1156.00 by March 12th.

June Treasury Bonds have recovered earlier losses and are now trading better. Earlier traders sold Treasuries in anticipation of a rate hike by China. The inability to break -through yesterday’s low at 115’27 triggered a short-covering rally. Technically, this market picked up strength after regaining a 50% line at 116’04. This price will dictate the direction of the market into the close. Holding above it means the market is discounting the Chinese news. Falling below it will indicate a further drop to 115’06.

The weaker Dollar is triggering a short-covering rally in April Gold. Technically this market is in a position to post a minor closing price reversal bottom. Oversold conditions are also contributing to the possibility of a turnaround. A late session resumption of downside pressure could drive this market to the recent bottom at $1088.50.

June Crude Oil is trading slightly weaker. A decline in demand for higher risk assets is behind today’s weakness as well as overbought conditions. Technically, this market is beginning to weaken. The charts indicate there is room to the downside, but the weaker Dollar and firm Euro is helping to limit losses.

The U.S. Dollar is trading mostly lower as Forex traders seem indecisive about taking a side in the market today.

At times, traders have been demanding lower yielding currencies perhaps in response to an overnight report that showed China’s consumer-price index spiked higher in February. Investors have been speculating since the release of the report showing that its central bank will raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

Today’s U.S. economic reports, international trade and weekly job claims, were mixed, but pressure has been on higher yielding assets anyway. Several times today all four major asset classes - the Dollar, Gold, Stocks and Treasuries - were trading lower. This action suggests that there may be a quarterly rebalancing or reallocation taking place.

The March Japanese Yen has seen choppy, two-sided trading. It rallied on speculation that China may have to hike interest rates to curb but then broke when U.S. equity markets weakened.

The March Canadian Dollar is trading slightly lower at the mid-session after reaching its lowest level since October 2009. Overbought conditions and less demand for higher risk assets is helping to contribute to the weakness. The bigger picture still suggests that the stronger currency is the Canadian Dollar. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The March Euro is trading better at the mid-session. Technically this currency is trading in a range and building a support base while waiting for a catalyst to trigger an upside breakout. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank voted to leave interest rates at historically low levels while reiterating its stance to intervene decisively if necessary to protect the currency. It also raised its outlook for 2010 inflation from 0.50% to 0.70%. The direction of the March Swiss Franc is being controlled by the movement of Euro.

The March British Pound is trading better after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. This market has been able to hold onto most of its overnight gains, but traders shouldn’t read too much into today’s action. Shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The U.S. Dollar is trading mostly lower as Forex traders seem indecisive about taking a side in the market today.

At times, traders have been demanding lower yielding currencies perhaps in response to an overnight report that showed China’s consumer-price index spiked higher in February. Investors have been speculating since the release of the report showing that its central bank will raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

Today’s U.S. economic reports, international trade and weekly job claims, were mixed, but pressure has been on higher yielding assets anyway. Several times today all four major asset classes - the Dollar, Gold, Stocks and Treasuries - were trading lower. This action suggests that there may be a quarterly rebalancing or reallocation taking place.

The USD JPY has seen choppy, two-sided trading. It broke on speculation that China may have to hike interest rates to curb but then rallied when U.S. equity markets weakened.

The USD CAD is trading slightly better at the mid-session after reaching its lowest level since October 2009. Oversold conditions and less demand for higher risk assets is helping to contribute to the strength. The bigger picture still suggests that the stronger currency is the Canadian Dollar. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The Euro is trading better at the mid-session. Technically this currency is trading in a range and building a support base while waiting for a catalyst to trigger an upside breakout. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank voted to leave interest rates at historically low levels while reiterating its stance to intervene decisively if necessary to protect the currency. It also raised its outlook for 2010 inflation from 0.50% to 0.70%. The direction of the USD CHF is being controlled by the movement of Euro.

The GBP USD is trading better after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. This market has been able to hold onto most of its overnight gains, but traders shouldn’t read too much into today’s action. Shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The AUD USD fell overnight on speculation China will have to raise interest rates to curtail its economic growth and has not been able to recover because of weaker demand for higher yielding assets. The lower stock market is helping to contribute to the weakness. Should the U.S. equities markets turn positive, then Aussie shorts are likely to cover, sending this market higher. There is not question the Australian economy is strong, but speculators may begin to question whether it can sustain this growth without the support of China.

The NZD USD is trading lower at the mid-session after the overnight announcement by the Reserve Bank of New Zealand to leave its benchmark interest rate unchanged. Lower stock prices are helping to pressure the Kiwi, but a late session recovery in U.S. equity markets may trigger a short-covering rally into the close.

NZRB Governor Bullard said weak consumer spending and higher bank-funding costs are slowing the recovery. He stated further, “Households are still cautious with house sales and credit growth remaining subdued”. Given the tone of this report, investors are speculating that interest rates will remain low until at least June, but some are even projecting until the end of the year.

U.S. equity markets are expected to open weaker this morning but off their lows. Last night’s news that China’s inflation was higher than expected, fueled speculation of a rate hike which helped drive down demand for higher yielding assets. The lack of follow-though to the downside has triggered a short-covering rally which is helping to boost equity prices from their overnight lows. Yesterday the March E-mini S&P 500 stopped at its January high of 1148.00, triggering a profit-taking break. The overnight rally from its low and building momentum could trigger another test of this level today. The daily swing chart suggests a breakout over this level will ignite a rally to 1156.00 by March 12th.

June Treasury Bonds are trading lower. Traders are selling Treasuries in anticipation of a rate hike by China. Technically, this market is hugging a 50% line at 116’04. This price will dictate the direction of the next move. Holding above it means the market is discounting the news. Falling below it will indicate a further drop to 115’06. Today’s Weekly Initial Claims Report should move the T-Bonds. Traders are looking for a drop of 9K. A decline bigger than this figure will trigger a break. A number better than 9K will trigger a rally.

The mixed Dollar is triggering mixed results in April Gold. Oversold conditions could fuel a short-covering rally. More downside pressure could drive this market to the recent bottom at $1088.50. June Crude Oil is trading slightly weaker. Technically, this market is beginning to weaken. Overbought conditions could trigger the start of a sizeable correction. A weaker Dollar and stronger Euro should be supportive.

China’s consumer-price index spiked higher in February, leading to speculation that its central bank will raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

Higher yielding currencies fell on the prospect of further tightening by China. The low yielding Japanese Yen benefitted the most. Any attempts to dampen economic growth after inflation jumped to a 16-month high should continue to fuel demand for safe-haven investments. If China decides to move further on its attempt to curb excessive growth in the economy then look for the Yen to be the major beneficiary of rising risk aversion.

Although speculation that China will tighten its monetary policy further helped drive the Yen up initially following the release of the inflation news, the USD JPY is trading better. Traders seem to be paying more attention to an earlier report which showed a government revision of fourth-quarter gross domestic product growth. The government cited slightly weaker corporate capital expenditures and private inventories as the main reasons for the downward adjustments. Further evidence that the Japanese economy was in a weakened state was a report which showed the government adjusted down a price measuring gauge to show record deep deflation.

Today, traders will get an opportunity to react to major economic reports for the first time this week. On board this morning are the International Trade Report and Weekly Initial Jobless Claims. Economists say the trade deficit in the U.S. probably widened for the third month as imports climbed faster than exports. The rise in oil price was most likely the cause. Weekly Jobless Claims are expected to drop by 9000 to 460K. The range is 450K to 470K. An increase in the number of unemployment claims is likely to fuel a rally in the Dollar. A greater than expected drop should fuel demand for higher risk assets.

The March Canadian Dollar is trading slightly lower this morning after reaching its highest level since October 2009. Overbought conditions and less demand for higher risk assets is helping to contribute to the weakness. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The March Euro is trading mixed this morning. Technically this currency is trading in a range and building a support base while waiting for a catalyst to trigger an upside breakout. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank is expected to leave interest rates at historically low levels while softening its attitude toward intervention. It is also likely to express its worries about inflation risks and excessive appreciation in the Swiss Franc. Further appreciation in the Euro this morning will drive up the March Swiss Franc.

The March British Pound is trading better after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. The overnight move is probably light position paring or short-covering. Shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The March Australian Dollar fell overnight on speculation China will have to raise interest rates to curtail its economic growth. Since this report, however, the Aussie has recovered and is trading positive. The volatile overnight tone is likely to spillover to the New York session. There is not question the Australian economy is strong, but speculators may begin to question whether it can sustain this growth without the support of China.

The March New Zealand Dollar is trading lower after the Reserve Bank of New Zealand left its benchmark interest rate unchanged. NZRB Governor Bullard said weak consumer spending and higher bank-funding costs are slowing the recovery. He stated further, “Households are still cautious with house sales and credit growth remaining subdued”. Given the tone of this report, investors are speculating that interest rates will remain low until at least June, but some are even projecting until the end of the year.

China’s consumer-price index spiked higher in February, leading to speculation that its central bank will raise interest rates to curb economic growth. The inflation report showed an acceleration from the year-earlier month, to a greater-than-expected pace of 2.7%. The higher growth was tied to greater-than-expected gains in fixed-asset investment, bank lending, and industrial production.

Higher yielding currencies fell on the prospect of further tightening by China. The low yielding Japanese Yen benefitted the most. Any attempts to dampen economic growth after inflation jumped to a 16-month high should continue to fuel demand for safe-haven investments. If China decides to move further on its attempt to curb excessive growth in the economy then look for the Yen to be the major beneficiary of rising risk aversion.

Although speculation that China will tighten its monetary policy further helped drive the Yen up initially following the release of the inflation news, the USD JPY is trading better. Traders seem to be paying more attention to an earlier report which showed a government revision of fourth-quarter gross domestic product growth. The government cited slightly weaker corporate capital expenditures and private inventories as the main reasons for the downward adjustments. Further evidence that the Japanese economy was in a weakened state was a report which showed the government adjusted down a price measuring gauge to show record deep deflation.

Today, traders will get an opportunity to react to major economic reports for the first time this week. On board this morning are the International Trade Report and Weekly Initial Jobless Claims. Economists say the trade deficit in the U.S. probably widened for the third month as imports climbed faster than exports. The rise in oil price was most likely the cause. Weekly Jobless Claims are expected to drop by 9000 to 460K. The range is 450K to 470K. An increase in the number of unemployment claims is likely to fuel a rally in the Dollar. A greater than expected drop should fuel demand for higher risk assets.

The USD CAD is trading slightly better this morning after reaching its lowest level since October 2009. Oversold conditions and less demand for higher risk assets is helping to contribute to the strength. The bigger picture still suggests that the stronger currency is the Canadian Dollar. Higher oil prices and the prospect of rising Canadian interest rates have helped increase the view that the Canadian Dollar could test parity. Investors are beginning to believe that the Bank of Canada is likely to hike interest rates before the Fed.

The Euro is trading mixed this morning. Technically this currency is trading in a range and building a support base while waiting for a catalyst to trigger an upside breakout. The easing of fiscal tensions in Greece is contributing the most to the developing bullish tone. Traders seem to be waiting for some event to shake up the record number of shorts in the market in order to trigger a short-covering rally.

The Swiss National Bank is expected to leave interest rates at historically low levels while softening its attitude toward intervention. It is also likely to express its worries about inflation risks and excessive appreciation in the Swiss Franc. Further appreciation in the Euro this morning will drive down the USD CHF.

The GBP USD is trading better after a Bank of England report predicted that inflation would be 2.5% this time next year. This projected increase was slightly better than the November guess of 2.4%. The overnight move is probably light position paring or short-covering. Shorts still feel that there is much more potential to the downside because of the weak economy, political uncertainty and the BoE’s dovish tone.

The AUD USD fell overnight on speculation China will have to raise interest rates to curtail its economic growth. Since this report, however, the Aussie has recovered and is trading positive. The volatile overnight tone is likely to spillover to the New York session. There is not question the Australian economy is strong, but speculators may begin to question whether it can sustain this growth without the support of China.

The NZD USD is trading lower after the Reserve Bank of New Zealand left its benchmark interest rate unchanged. NZRB Governor Bullard said weak consumer spending and higher bank-funding costs are slowing the recovery. He stated further, “Households are still cautious with house sales and credit growth remaining subdued”. Given the tone of this report, investors are speculating that interest rates will remain low until at least June, but some are even projecting until the end of the year.

U.S. equity markets are selling off after a strong early morning rally. The break started after the March E-mini S&P 500 failed to attract buyers after reaching its high for the year at 1148.00. The trend hasn’t turned down, but the trading action suggests that a closing price reversal top is a possibility. Volatility has been low which suggests that a surprise event or more activity is imminent.

June Treasury Bonds are trading lower after breaking through a key 50% level at 115’04. The next downside objective is 115’24. Watch for a reversal to the upside if equity markets sell-off into the close. Oversupply is providing additional bearish pressure on this market.

Higher demand for risky assets and a weaker Dollar should have given April Gold a boost today, but this did not take place as the normal correlation relationship between gold and the Dollar has not been working today. Downside momentum is building which could drive this market into the early March low at $1088.50.

June Crude Oil surged to a new high for the month after this week’s API report showed a smaller-than-expected increase in U.S. crude supplies and a big drop in gasoline supplies. Crude Oil backed off of its high after demand dropped for higher yielding assets.

The U.S. Dollar is trading mixed at the mid-session in an unusual day as the normal correlations between the Dollar, gold and equities are not working. The lack of major U.S. economic reports this week may be having an influence on the trade. The trade weighted Dollar Index is trading lower but this may not be a true assessment of what is actually going on today.

Early in the session it was clear that traders were looking for risk as the stock indices rose with the March E-mini S&P 500 reaching the high for the year at 1148.00. Strong demand for risk was helping to drive up the asset sensitive Australian Dollar, New Zealand Dollar and Canadian Dollar. At the same time, selling pressure was on the lower-yielding Japanese Yen.

The easing of financial tensions in Greece may be helping to give the March Euro a boost along with better economic manufacturing news from Italy and France. These events offset a weak exports report from Germany. Trading has been light and choppy this week and expected to remain this way until enough buying power can come in to pressure the short hedge funds out of the market.

The March British Pound is trading weaker, driven lower behind the weak fundamentals. Traders are most concerned at this time about the possibility of a credit rating downgrade by one or more of the credit agencies. Worries over the economic recovery, political uncertainty and the Bank of England’s soft monetary policy should continue to pressure this currency.

The March Japanese Yen was down sharply because of greater demand for higher risk assets, but its weakness has subsided at the mid-session following a sell-off in U.S. equity markets. Overnight the Yen felt downside pressure after China announced that both exports and imports grew at a higher-than-expected rate.

The rising Euro is helping to support the March Swiss Franc. Traders are looking for the Swiss National Bank to announce that interest rates will remain low while offering a more hawkish commentary. The SNB is most concerned about the impact of the falling Euro on its export market which accounts for 50% of the country’s economy. Gains in the March Swiss Franc may have been limited by an intervention by the SNB earlier today.

Falling gold prices and rising crude oil are helping to limit the movement in the March Canadian Dollar. The Canadian Dollar started out stronger because of higher equity and commodity markets, but it could not hold its gains after gold and U.S. stock indices began their sell-off. The Loonie began to mount an intraday turnaround after approaching the January high at .9777. Oversold conditions and worries that the Bank of Canada may issue a verbal intervention kept longs from pressing this market higher.

The U.S. Dollar is trading mixed at the mid-session in an unusual day as the normal correlations between the Dollar, gold and equities are not working. The lack of major U.S. economic reports this week may be having an influence on the trade. The trade weighted Dollar Index is trading lower but this may not be a true assessment of what is actually going on today.

Early in the session it was clear that traders were looking for risk as the stock indices rose with the March E-mini S&P 500 reaching the high for the year at 1148.00. Strong demand for risk was helping to drive up the asset sensitive AUD USD, NZD USD and USD CAD. At the same time, selling pressure was on the lower-yielding Japanese Yen.

The easing of financial tensions in Greece may be helping to give the EUR USD a boost along with better economic manufacturing news from Italy and France. These events offset a weak exports report from Germany. Trading has been light and choppy this week and expected to remain this way until enough buying power can come in to pressure the short hedge funds out of the market.

The GBP USD is trading weaker, driven lower behind the weak fundamentals. Traders are most concerned at this time about the possibility of a credit rating downgrade by one or more of the credit agencies. Worries over the economic recovery, political uncertainty and the Bank of England’s soft monetary policy should continue to pressure this currency.

The USD JPY was up sharply because of greater demand for higher risk assets, but its strength has subsided at the mid-session following a sell-off in U.S. equity markets. Overnight the Yen felt downside pressure after China announced that both exports and imports grew at a higher-than-expected rate.

The rising Euro is helping to pressure the USD CHF. Traders are looking for the Swiss National Bank to announce that interest rates will remain low while offering a more hawkish commentary. The SNB is most concerned about the impact of the falling Euro on its export market which accounts for 50% of the country’s economy. Losses in the USD CHF may have been limited by an intervention by the SNB earlier today.

Falling gold prices and rising crude oil are helping to limit the movement in the USD CAD. The Canadian Dollar started out stronger because of higher equity and commodity markets, but it could not hold its gains after gold and U.S. stock indices began their sell-off. The USD CAD began to mount an intraday turnaround after approaching the January low at 1.0224. Oversold conditions and worries that the Bank of Canada may issue a verbal intervention kept shorts from pressing this market further.

The AUD USD has given back all of its earlier gains as U.S. stock market weakness sent investors out of higher risk assets and into safer plays. Technically, this market is set up for a daily closing price reversal top. The NZD USD is trader off its high after demand for risk dried up. Traders are looking for the Reserve Bank of New Zealand to keep interest rates low while suggesting they are not likely to rise until the economy shows a sustained recovery.

U.S. equity markets are trading firm overnight after yesterday’s surge to the upside. Buying pressure dried up late in the session, but no damage was done to the uptrend. Volatility is falling which is making traders appear complacent. This could be both good and bad. On the good side, it could mean traders are gaining confidence in the recovery which will send prices higher. On the bad side, too much complacency leaves the markets vulnerable to a bearish surprise or could trigger the start of a sizeable correction. At this time let’s just focus on the trend and determine what it is telling us. The main trend is up in the March E-mini S&P 500. The swing chart indicates 1156.00 is the next upside target by March 12th.

June Treasury Bonds are trading lower but finding support at a 50% level at 116’04. If this area fails to hold, then look for a further correction to 115’24. A pick-up in demand for risky assets and additional supply concerns is putting pressure on this market.

Higher demand for risky assets and a weaker Dollar are providing support for April Gold and June Crude Oil. Gold is recovering after a short-term break. This market will have to take out $1145.80 in order to resume the uptrend. June Crude Oil is sitting on an uptrending Gann angle at 82.44. This angle will dictate the markets direction.

Firmer stock indices, gold and crude oil are indicating that trader demand for risk could be up today which could pressure the Dollar versus commodity-linked currencies.

After trading higher overnight, the trade-weighted Dollar Index has turned down as it trades near its low shortly before the U.S. opening. This may be an indication that risk sentiment is shifting toward the riskier side.

The March Euro had a rocky night but has recovered all of its earlier loss and is now trading better. Downside pressure has eased since Greece has agreed to implement budget cuts. Traders are also becoming more optimistic that some sort of bailout package announcement is imminent. The ability to turn positive after a report last night showed that German trade data came in worse than expected is a sign that there are buyers out there. The key to driving this market higher will be to find a way to get the massive amount of shorts out of the market.

The March British Pound is feeling more downside pressure overnight. The absence of buyers is clearly evident as traders are approaching the long side of the market with caution. The major concern amongst traders at this time is whether the credit agencies will issue a downgrade of U.K. debt. Adding to the pessimism is the weak U.K. economy, political uncertainty and the dovish stance by the Bank of England.

The March Japanese Yen is trading lower because of demand for higher risk assets. A strong surge in the equity markets today should drive this market sharply lower. The March Swiss Franc is up. The firming Euro is helping to diminish the possibility of another intervention by the Swiss National Bank. The SNB is expected to leave interest rates unchanged at its next meeting, but reiterate that it stands committed to protecting its export industry in the face of a deterioration of the Euro Region economy.

Overbought conditions seem to be preventing the March Canadian Dollar from rallying further despite stronger demand for gold and crude oil this morning. This pair is rapidly approaching a key resistance area. Traders are approaching the long-side with caution out of fear the Bank of Canada may try to weaken its currency in order to prevent the expensive Loonie from doing damage to its export market.

News that Chinese exports increased the most in three years is helping to increase demand for the March Australian Dollar and March New Zealand Dollar. The Australian Dollar continues to mount a strong rally after taking out key resistance recently. The strong economy is causing traders to factor in the possibility of another rate hike by the Reserve Bank of Australia at its next meeting.

The good news out of China is also helping to boost the New Zealand Dollar. Although the Reserve Bank of New Zealand is expected to keep interest rates low for a prolonged period of time, traders like the Kiwi at its current level. The overnight action has put the March New Zealand Dollar in a position to turn the main trend up on the daily chart on a move through .7078. The next 50% upside target is .7124. An additional sign of strength is the breaking of a downtrending Gann angle overnight. This move could help trigger additional short-covering once the New York session is open.

Firmer stock indices, gold and crude oil are indicating that trader demand for risk could be up today which could pressure the Dollar versus commodity-linked currencies.

After trading higher overnight, the trade-weighted Dollar Index has turned down as it trades near its low shortly before the U.S. opening. This may be an indication that risk sentiment is shifting toward the riskier side.

The EUR USD had a rocky night but has recovered all of its earlier loss and is now trading better. Downside pressure has eased since Greece has agreed to implement budget cuts. Traders are also becoming more optimistic that some sort of bailout package announcement is imminent. The ability to turn positive after a report last night showed that German trade data came in worse than expected is a sign that there are buyers out there. The key to driving this market higher will be to find a way to get the massive amount of shorts out of the market.

The British Pound is feeling more downside pressure overnight. The absence of buyers is clearly evident as traders are approaching the long side of the market with caution. The major concern amongst traders at this time is whether the credit agencies will issue a downgrade of U.K. debt. Adding to the pessimism is the weak U.K. economy, political uncertainty and the dovish stance by the Bank of England.

The USD JPY is trading higher. Demand for higher risk assets is pressuring the Japanese Yen. A strong surge in the equity markets today should drive this pair sharply higher. The USD CHF is down. The firming Euro is helping to diminish the possibility of another intervention by the Swiss National Bank. The SNB is expected to leave interest rates unchanged at its next meeting, but reiterate that it stands committed to protecting its export industry in the face of a deterioration of the Euro Region economy.

Oversold conditions seem to be preventing the USD CAD from breaking further despite stronger demand for gold and crude oil this morning. This pair is rapidly approaching a key support area. Traders are approaching the short-side with caution out of fear the Bank of Canada may try to weaken its currency in order to prevent the expensive Loonie from doing damage to its export market.

News that Chinese exports increased the most in three years is helping to increase demand for the AUD USD and NZD USD. The Australian Dollar continues to mount a strong rally after taking out key resistance recently. The strong economy is causing traders to factor in the possibility of another rate hike by the Reserve Bank of Australia at its next meeting.

The good news out of China is also helping to boost the New Zealand Dollar. Although the Reserve Bank of New Zealand is expected to keep interest rates low for a prolonged period of time, traders like the Kiwi at its current level. The overnight action has put the NZD USD in a position to turn the main trend up on the daily chart on a move through .7078. The next 50% upside target is .7124. An additional sign of strength is the breaking of a downtrending Gann angle overnight. This move could help trigger additional short-covering once the New York session is open.